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This guide is for SaaS businesses on how to do efficient bookkeeping & Accounting.

In this guide you will learn:

  • Introduction to SaaS Bookkeeping & Accounting
  • How do you comply with US sales tax using Amazon FBA
  • What are US marketplace facilitator laws
  • Product and service taxability
  • What can help you handle Amazon FBA sales tax
  • Applicability of sales tax collection system and frequency in states
  • US sales tax working with Amazon FBA key takeaways
If you want to know everything about Amazon FBA business sales tax in the USA, this guide is a must-read for you.
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CHAPTER 1:

An overview of Amazon FBA and its working in the US

Although Amazon FBA offers a lot of assistance to your company, it doesn’t take care of your sales taxes and is much more involved than that.
Few business owners are aware of how Amazon affects the entire tax system. You are aware of the requirement under law to promptly collect sales taxes from customers and remit them to the state governments.
You may discover all the details you require regarding how using Fulfillment by Amazon affects your US sales tax requirements right here.
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All About Amazon FBA And Its Working

Amazon offers its sellers the Fulfillment by Amazon service, which handles product storage, distribution, and delivery. Once you've registered for FBA as an Amazon seller and business owner, you send your shipments to Amazon fulfillment centers and keep track of them. You get assistance from Amazon's online seller tools as you go along.

Customers who have Amazon Prime receive free, extremely quick shipping on your products, and many other customers also qualify, increasing the competitiveness of your goods. These orders are filled by Amazon, which also informs the customer of the status of their order.

Additionally, Amazon FBA handles all of your customer service needs, including buyer questions, refunds, and returns.

Pro tip: Keep track of which FBA centers are storing and organizing your products. because your company now has a sales tax nexus as a result.

Where are the Amazon fulfillment centers in the USA?

Well, there are over 100 Amazon FBA warehouses in the USA all over the country. The following states have at least one Amazon fulfillment center:

  • Arizona
  • California 
  • Colorado
  • Connecticut 
  • Delaware 
  • Florida 
  • Georgia
  • Illinois
  • Indiana 
  • Indiana 
  • Kansas 
  • Kentucky 
  • Maryland 
  • Massachusetts 
  • Michigan 
  • Minnesota
  • Nevada 
  • New Hampshire
  • New Jersey 
  • North Carolina 
  • Ohio 
  • Pennsylvania
  • South Carolina 
  • Tennessee
  • Texas 
  • Virginia
  • Washington
  • Wisconsin
In actuality, these states don't charge sales tax. Therefore, even though some of your products may be kept and sold here, it won't result in nexus.

CHAPTER 2:

How do you comply with US sales tax using Amazon FBA

It’s not a national policy, like the VAT in the entire European Union or the GST in Australia, for starters. The US sales tax is handled at the state and local levels rather than at the federal level. The authority to establish their own tax laws and tax rates belongs to the states and local governments.
In this chapter, you will learn about how to comply with US sales tax using Amazon FBA.
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All About US Sales Tax Compliance Using Amazon FBA

  • Sales taxes are collected statewide by 45 states plus the District of Columbia. (There are none in Alaska, Delaware, Montana, New Hampshire, or Oregon.)
  • A local tax of some kind is levied in 38 states, either entirely or in part. The result is that the US has thousands of tax jurisdictions!
There are a number of additional elements that determine whether your company is liable or not, or if it has nexus, within those states and local jurisdictions.

There are three simple procedures to ensuring tax compliance if you are aware of your company's nexus locations. Additionally, you can get some assistance through your Amazon FBA account.

  • Apply in that state for a seller's license
For the tax system in each state, you must register separately. On this useful IRS directory, you can locate the webpage for the state's Department of Revenue. Another choice is to sign up simultaneously for the SSUTA states utilizing a straightforward (and cost-free) online form provided by the Streamlined Sales Tax Registration System (SSTRS). Which of the 24 states apply to your firm can be chosen at will. Find out how to apply for a seller's permit.

  • Customers who reside in that state must pay sales tax
This includes any applicable county or district taxes in addition to the overall state tax rate. However, not all states impose taxes at the local level. The tax rate is often destination-based, meaning it depends on where the customer is located. Only a few states have origin-based taxes, which means you must charge taxes based on the location of your company. Find out more information on origin- and destination-based sales taxes.

Each of these must be individually configured in Amazon Seller Central. Amazon won't do anything for you until you set up your account to collect these taxes.

  • Report sales tax to that state
Each state will assign you a filing frequency when you register. It might happen once a month, once every three months, or once a year. To prevent fees, make sure to take notice of your due dates and make payments on time. Again, for detailed instructions on how to file, consult the official websites of the various states.

The foregoing is all true, however, there is a significant and expanding exception! And at that point, a state's "marketplace facilitator statute" takes effect.

CHAPTER 3:

What Are US Marketplace Facilitator Laws

A company or organization that facilitates retail sales by entering into agreements with third parties to sell its products on its platform is known as a marketplace facilitator. These sales are made possible by marketplace facilitators who list the goods, accept payments, gather receipts, and occasionally help with shipping.
Laws governing these facilitators’ obligations to collect and remit sales taxes are those we refer to as marketplace facilitator laws.
In this chapter, you will learn about the US marketplace facilitators law for Amazon FBA business
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All About US Marketplace Facilitator Laws

Marketplace facilitator rules are a type of tax regulation that mandates that online marketplaces like Amazon, eBay, and Etsy collect and submit sales tax on behalf of all of their vendors, including you!

These rules aim to make it easier for the state to recover as much sales tax as possible. It is undoubtedly simpler to hold Amazon, as a single corporation, liable for the taxes resulting from all of the purchases made on its platform than it is to track down each individual Amazon vendor.

For you, this implies that you won't have to worry about paying taxes for any sales you make on Amazon in the "marketplace facilitator" states where you have nexus. That tax money needs to be charged, gathered, and sent via the market.

However, you are still in charge of collecting tax from sales made through the state's other channels and outlets. And even if you solely sell on Amazon and never collect sales tax yourself, you're still likely obliged to keep a current tax permit for as long as you have linkage there.

Marketplace facilitator laws are increasingly spreading across the globe. Versions of a marketplace facilitator tax policy are currently in effect or being developed in the following states (although considering how quickly these laws are evolving, this list may not be entirely up to date!):

Alabama, Connecticut, Iowa, Minnesota, New Jersey, Oklahoma, Pennsylvania, Virginia, and Washington are among the states on this list.

The word "versions" is crucial there. The rules for marketplace facilitators vary. Every state has unique nuances. For instance, even if you are not responsible for managing the tax collection on your Amazon sales, some states may nonetheless require you to file tax returns.

CHAPTER 4:

What type of Amazon products and services are taxable in the US

Tax may apply to items purchased on Amazon Marketplaces and shipped to destinations both inside and outside the US, including territories.
“Products are taxable, while services are non-taxable,” has always been the general rule of thumb when it comes to sales tax.
In that case, you would be required to collect sales tax from customers who purchase coffee mugs from your company. However, you shouldn’t charge sales tax if your company designs logos for coffee shops.
In this chapter, you will learn about the Amazon FBA goods and services that are taxable in the US.
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Amazon Goods and Services Taxability In The US

There are plenty of exceptions to the above rule. Why? Let’s see.

  • The 46 US states that have a sales tax enact their own regulations and laws.
  • States are broadening their tax bases, and in some cases, this entails imposing sales tax on previously exempt services.
  • The distinction between goods and services is becoming hazier in the digital age. An ebook can be downloaded, but is that a tangible product or a service? Consider using the software as a service. The choice is up to each state.
Tax may apply to items purchased on Amazon Marketplaces and shipped to destinations both inside and outside the US, including territories.

How Tax Is Calculated

The following are just a few of the many variables that affect how much tax is added to your order:

  • The seller's identity
  • The nature of the goods or services gotten
  • The moment and place of completion
  • Your order's shipping or delivery address
Between the time you place an order and the time your shipment is finished, these variables may change. As a result, there may be a change in the tax assessed on your order. When we confirm a purchase, we present an "Estimated Tax" that will be paid in a Check Out. When your order is complete and processed, the amounts shown as estimated tax may then be revised.

Your order will be subject to the state and local tax rates in effect at the place where it will be delivered or fulfilled. For instance, even if you reside in a jurisdiction without sales tax, your order may still be subject to tax if it is transported to another state. A shipment to a domestic location as opposed to a corporate address, for example, could affect the tax rates that are applied to your order. Additionally, the overall selling price of an item will typically include gift-wrapping fees, item-level discounts, and shipping and handling fees. These fees may be allocated to the specific products in order if they are applied at the order level.

You may be charged the appropriate country tax rate if you order from Amazon.com and ship to a nation outside of the US.

Note:

  • Gift cards are not subject to taxes when purchased, but they may be taxed when used to make purchases.
  • There is a tax associated with renting textbooks from Warehouse Deals and having them delivered to locations in Delaware.

CHAPTER 5:

What can help you handle Amazon FBA sales tax

Almost everyone needs to deal with Amazon FBA sales tax returns at some point throughout the year, and January is one of those occasions. You could need to submit more frequently than once a year depending on the scale of your business, but almost everyone will have at least one sales tax return to complete in January.
In this chapter, you will get some advice on how to effectively manage your sales tax on Amazon in today’s post as you move through the procedure.
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Handling Amazon FBA Sales Tax

Once you have everything set up to collect sales tax, the first thing to do is to make sure you are aware of the deadlines for each state you are reporting in. You may easily find these deadlines by searching "STATE NAME sales tax return due date" on Google or visiting the state's website that applies to you. It's crucial to verify them to ensure compliance because each state has various standards, some of which vary depending on how frequently you file. In order to avoid forgetting these deadlines, we advise adding calendar reminders.

The actual payment of the sales tax you have accrued to the states is what comes next. When it comes to acquiring the data required to submit sale tax reports and remit payments to the states, there are two major alternatives. Using Amazon's reports, you can do it manually, or you can utilize a tool to help automate the process.

The alternative is to streamline the process by using a service. The information you require to file your sales tax returns in each state will be generated by this service, which may also be able to file them automatically in some circumstances.

Simply ensure that you are paying your sales tax using whichever method works best for you. Either choice will be acceptable.

Top 3 Amazon FBA Sales Tax Pro Tips

  • Sales volume and sales tax frequency are frequently related. A state will urge you to submit and pay sales tax more frequently the more sales there are in that state. You may even be able to adjust your filing frequency in some places, including Arizona if you ask. It might definitely pay to get in touch with your state's taxing authorities to find out if this might be a possibility for your company as most sellers prefer to file annually or quarterly when it's feasible.
  • Even if you didn't actually collect any sales taxes for a particular state, you'll still need to file a return for each one where you applied for a sales tax permit. To do this is to submit a "zero return." Failure to file in states where you are registered may incur fines or potentially result in the revocation of your sales tax authorization.
  • Another piece of advice: certain states offer a discount for timely reporting of sales tax. To be sure you are taking advantage of any reductions that might be available for your business, we'd advise checking with each state in which you file.
Sales tax compliance is not the most enjoyable aspect of selling on Amazon, but it is crucial to do it correctly to avoid unnecessary issues for your company. We advise seeking professional guidance with any tax or legal issue of this nature. To ensure that we are adequately covering our bases, we always make sure to run decisions about sales tax and accounting issues past my CPA.

CHAPTER 6:

Which sales tax collection system and frequency are applicable in your state?

It is very important for you being an Amazon FBA seller to know about the sales tax collection system and frequency applicability in your state.
Keep reading this chapter to know the details…
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  • Sales Frequency And Due Dates
Dates: Write down the deadlines for submitting sales taxes in each relevant state on your calendar. The 15th, 25th, or last day of the month is frequently the date for these events. You can be required to submit your sales tax file every month, every quarter, every year, or every two months. Sales tax must be collected by sellers who make a lot of sales, and they may need to file more frequently than normal businesses.

  • Destination-based versus Origin-based
You must determine whether the state is origin-based or destination-based in order to fulfill your sales tax calculation duties.

  • Origin-Based
When you are compelled to collect sales tax as a seller because of your location in the state, the state is origin-based. For instance, if you sell in Texas (origin-based system), all of your buyers in Texas will be charged the local tax rate.

  • Destination-Based
The majority of states apply sales tax laws based on destination-based sourcing. The sales tax is determined by the buyer's place of residence if you are situated in a state with a destination-based tax. As a result, you would charge Dallas sales tax if you were a store in Seattle and your customer's delivery address was there.

CHAPTER 7:

Final Key Takeaways

In this chapter, we will recall the final key points associated with US Sales tax working with Amazon FBA.
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Let’s Recall Some Important Points

The Fulfillment by Amazon service, which covers product storage, distribution, and delivery, is available to Amazon's sellers. As an Amazon seller and business owner who has registered for FBA, you send your shipments to Amazon fulfillment centers and maintain track of them. As you continue, you receive support from Amazon's online selling tools.

  • Observe which FBA facilities are housing and arranging your merchandise. because as a result, your business now has a sales tax nexus.
  • Sales volume and the frequency of sales taxes are typically correlated. The more you purchase in a state, the more frequently you will be urged to submit and pay sales tax. If you inquire, you might even be allowed to change your filing frequency in Arizona and other states. Most sellers prefer to file annually or quarterly when it is possible, so it may pay to contact the taxes authorities in your state to see if this is an option for your business.
  • You must still submit a return for each state where a sales tax permit application was made, even if you didn't actually collect any sales taxes there. This is known as submitting a "zero return." In states where you are registered, failure to file could result in penalties or even the cancellation of your sales tax permission.
  • Another piece of advice is that certain jurisdictions provide a discount for timely sales tax reporting. We suggest checking with each state where you file to make sure you are utilizing any discounts that may be accessible to your company.

CHAPTER 8:

FAQs

Do you have any queries until now? This chapter is just for you.
Here are some of the most frequently asked questions that we have answered.
Keep reading…
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FAQs

How to collect sales tax on Amazon FBA?

In most states where an Amazon fulfillment facility is located, Amazon currently collects sales tax on behalf of merchants. The details below apply to states where Amazon is not required to collect sales tax on behalf of merchants.

How Amazon FBA businesses can comply with US sales taxes?

It's not a national policy, like the VAT in the entire European Union or the GST in Australia, for starters. The US sales tax is handled at the state and local levels rather than at the federal level. The authority to establish their own tax laws and tax rates belongs to the states and local governments.

Conclusion

Hopefully, this article has helped shed some light on the things you need to know about Amazon FBA and US sales taxes.
Every state in the US has its own tax rules so you have to pay the sales tax as per the state norms.
In case you have any difficulty understanding the US sales tax for Amazon FBA, we at Freecashflow.io can help you. We will handle Amazon FBA business bookkeeping, accounting, and financing. Contact us anytime for assistance.
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